OAG 95-13

March 31, 1995

Subject: Proposed Drug Tax

Written by: Ross T. Carter

Requested by: Kim Burse, Secretary, Revenue Cabinet

Syllabus: The Kentucky marijuana and controlled substances tax is not unconstitutional under the double jeopardy clause of the U. S. Constitution.

Statutes construed: KRS 138.870–.889

Opinion of the Attorney General

The question presented is whether the marijuana and controlled substances tax constitutes double jeopardy that is prohibited by the fifth amendment. We conclude that the tax is legal and does not violate the fifth amendment.

The question arises because the U.S. Supreme Court recently held a Montana illegal drug tax unconstitutional. Department of Revenue of Montana v Kurth Ranch, 511 US , 128 L Ed 2d 767, 114 S Ct 1937 (1994). We are asked to evaluate the Kentucky tax in light of the principles adopted in the Kurth Ranch case.

The Kurth Ranch case

The Montana Dangerous Drug Tax Act imposed a steep tax on possession and storage of dangerous drugs. Several features of the tax made it appear intertwined with the state's traditional criminal laws: the tax was payable only after a taxpayer was arrested for a drug-related crime, the tax return was filled out by law enforcement authorities, and the tax res was confiscated and destroyed. These features conditioned liability for the tax on the commission of a crime.

Kurth Ranch, convicted in state court of drug dealing and assessed a tax of almost $900,000, sought to have the assessment overturned on the grounds that the tax constituted double jeopardy by punishing conduct that had already been punished by the traditional drug laws. The U.S. Supreme Court agreed. The case implicated the following well-established points of constitutional law:

The Court found that the Montana tax was absolutely conditioned on commission of a crime. The only persons subject to the tax were persons who had been arrested for possession of or commerce in the taxable items. Because of this feature, Montana's only justification for the tax was that it was a remedial measure intended to reimburse the state for the cost associated with enforcement of the drug laws. Montana could not prevail in this argument because it offered absolutely no evidence regarding its enforcement costs (perhaps acknowledging that the cost was nowhere near the $900,000 tax assessment).

The Kurth Ranch case invoked only the analysis applicable to civil penalties that are conditioned on the commission of a crime. Indeed, the first sentence of the Court's opinion says, “This case presents the question whether a tax on the possession of illegal drugs assessed after the State has imposed a criminal penalty for the same conduct may violate the constitutional prohibition against successive punishments for the same offense.” The Court flatly stated that in other cases, where the penalty is not imposed on the same conduct already punished as a crime, the result would be entirely different. “Montana no doubt could collect its tax on the possession of marijuana, for example, if it had not previously punished the taxpayer for the same offense, or, indeed, if it had assessed the tax in the same proceeding that resulted in conviction.” Id., 128 L Ed 2d at 778.

The Kentucky tax

Kentucky has done exactly what the Supreme Court said Montana could have done: impose the tax on conduct not previously punished as a crime. The features of Kentucky's tax are:

The General Assembly has succeeded in establishing liability for the tax as a distinct and independent sphere of activity that is not connected in any material respect with a criminal prosecution. A person may be liable for the tax even if no prosecution is undertaken, or if a prosecution is unsuccessful. In fact, it is entirely possible for a person to obtain the stamps and pay the tax without heightening the risk of prosecution. For this reason the holding in the Kurth Ranch case is totally inapplicable to the Kentucky tax.

We therefore conclude that the marijuana and controlled substances tax is not unconstitutional.

Chris Gorman

Attorney General

Ross T. Carter


Division of Civil and Environmental Law